Yahoo (YHOO) Downgraded Over Core Business Concerns

In a report published Friday, Tigress Financial analyst Ivan Feinseth downgraded Yahoo Inc (YHOO) from ‘Buy’ to ‘Neutral’ on the company’s declining margins and core business deterioration.

Yahoo missed Wall Street’s 1Q/15 profit forecasts by more than 16.50% April 21, sorely disappointing investors looking for a rebound. The company reported adjusted EPS of $0.15 a share, down 61% on a year-over-year basis. Non-GAAP revenue also fell 4% to $1.04 billion, short of forecasts calling for revs of $1.05 billion.

Feinseth said [via Benzinga] that while Yahoo’s combined mobile, video, social and native ad unit posted a 58% increase in Q1 sales to $363 million, it represented just 30% of revenue. Although he expects those revenue categories to become eventually more significant, for the time being he said “we’ve tempered our expectations”.

Yahoo’s cash, cash equivalents, and marketable securities fell more than 31% in the past year to $6.9 billion. According to Feinseth, the company’s operating margins have narrowed significantly.

On valuation measures, Yahoo! Inc. shares have a T-12 price/sales ratio of 8.56 and a price/book for the same period of 1.20. EPS is $7.18. The name has a market cap of $39.88 billion and a median Wall Street price target of $54.00 with a high target of $68.00. Currently there are 22 analysts that rate YHOO a ‘Buy’, 14 rate it a ‘Hold’. No analyst rates it a ‘Sell’.